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How much do I need to save for retirement?
I've been reading how there won't be social security for my generation and even though I'm only 27, it has me freaked out! I know, I have better things to think about but I'm still curious. I know there are older people here, any suggestions? Good links? tia.
Wed. Nov 21, 9:51am
Think about whether or not you could really live on Social Security to begin with. It's not that much money!
I'm 25, and have been saving since I got my first raise. Every time I get a raise, I have half of the raise directly deposited to a savings account with a decent return (4% right now, online through Citi.) When that account gets high, I'll move some to an account I have at Scottrade, where I can put it into the stock market The other half of the raise I get to enjoy. That way, I'm getting a raise for spending reasons too. I also max the amount that goes to a 401k, to the amount matched by my employer, and participate in our company's stock purchase plan.
My husband and I also bought a condo in downtown Chicago. We chose that investment carefully as well. There are several "up-and-coming" neighborhoods, where we could've gotten much more space for our money. But, those neighborhoods still have TONS of space, and every day there is a newer, nicer building, so within a couple months, whatever we'd buy would've been outdated - there'd be newer and nicer for the same money. So we bought in an area that is well developed, and there is always a demand there. We bought in the building that had the best amenities and location for our pricepoint. We got a good price b/c the place needed work, and b/c of the housing crunch. We fixed it up and it's gorgeous, and we are confident that we will not lose money on it.
I think if you act smart and strategically, you can save a lot without really thinking about it. How much, I'm not sure. But the important part is to start!!
Wednesday, November 21, 2007, 12:08 PM
I had a personal finance professor who scared me into saving by doing soke simple math....
Assuming you retire at 65 and only live until your 85 and want to maintain the same standard of living, you need to start saving 10% of your gross each year starting at 30. If you wait until your 40, it's more like 20%. And all that assumes you are fully employed at all times, you don't retire (or get force out) early, and you don't live longer than 85 years. It also assumes a moderately good rate of return (8%) on your investements.
It scared me into starting at about age 27. Now 20 years later I am in good shape financially - not ready to retire yet, but know I will be OK when the time comes.
Wednesday, November 21, 2007, 2:45 PM
I just went to session with a 401k adviser at my husband's work. There is a lot to scare you. The thing she brought up that I hadn't even thought about was inflation.
I think there are lots of caculators on line that can help you figure out about how much money you should expect to need by retirement. My husband and I figured we need almost 2 million dollars! A lot depends on how you plan to live when you retire.
As scary as that seems. The fact that you are young is a huge asset!! Start saving now. The thing that takes the fear away the most is to be proactive. My husband and I are 25 and we started putting 6% of his income in his company's 401k a little over a year ago. He also gets a 4% match from his company. He doesn't make that much money so some months we think it would really be nice to have that money in our pocket now, but when we look at our 401k statement and see that we already have almost $10,000 we know it's worth it.
Wednesday, November 21, 2007, 4:02 PM
Save early, invest carefully and never stop.
That was our strategy, and it's working well. We used our retirement program through my husband's work, saving from the day he started; we quickly worked up to saving the percentage that would be matched by his agency, and have kept that up. We live below our means, avoid debt as much as possible, pay it off as quickly as we can when it is necessary, and focus on finding joy in things that don't require a lot of wealth so that we will be able to be happy on little if needed (but it looks like we will be doing very well--I love looking at the projections and thinking that he could retire quite young and we'd be able to draw his current salary--which is now supporting six but by then will only need to support 2 and help a bit here and there--and the fund would still grow annually!)
I'm grateful I started saving early. Also, that I'm a wise enough parent to know that the ability to work hard and to be self-reliant are better gifts than money to give to my children, and finally, that my children are not selfish or greedy.
It's American Thanksgiving Day, and I am feeling thankful.
Friday, November 23, 2007, 1:10 AM
My husband and I have a huge amount in 401K and also a large chunk in Emirgrant Direct with a return of 5% on our savings. We are 38 and put 10% into 401 w/ a company match. We also have stocks and investments. I think everyone should be putting money away for their retirements. I don't mind paying SS for older people but there is going to come a point in time where they won't even be able to collect and I think we shouldn't have to continue to pay into SS.
Friday, November 23, 2007, 1:54 AM
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